When your business needs funding to grow, you’ve got a lot of choices, but how do you choose the right one? From interest rates and length of the contract to where the funds come from and how the money impacts your balance sheet, there are a lot of considerations to take into account before making a decision.
A commercial loan broker is a matchmaker between borrowers and lenders. While there are countless loan types, interest rates, and sources out there, only a few of them are right for your business. The wrong loan type could make your organization ineligible for future funding. You can think of loan brokers as informed personal shoppers for your business’s financial needs. So, instead of an entire warehouse full of options, you’ll see the choices that fit you, and with our firm, you’ll get an explanation as to why other options aren’t the right fit. All you need to do is tell our brokers a bit about your business.
If that’s not incentive enough to work with one, here’s a list of advantages to working with a loan broker that you may not have considered before.
Time Savings
Calculating the money you save in discounts, special offers, and competitive pricing is easy. What’s not always simple to add up is the time and effort you spend on the daily needs of running your business. As the old saying goes, “time is money,” and the value of your time shouldn’t be ignored. While it’s certainly possible to shop and procure loans without a broker, you’ll spend a lot of time looking at options that don’t necessarily vibe with your business.
Commercial loan brokers spend all of their time getting to know lenders and loans. It’s what they do every day. Brokers do it so they can point business owners in the right direction right away. They also have the inside track on what lenders look for (even if they don’t publish this information), saving you from wasting time applying for loans you won’t get.
Specialization
Commercial loans are not one size fits all. The loan you’d use to buy a warehouse isn’t the same loan you’d use to build one. Lenders like banks and credit unions usually offer a selection of loans, like real estate, construction, and lines of credit. But you’re not likely to see much variety in the specific type of loan you’re looking for.
For example, say you’re in the market for a construction loan. You go to your bank, and they show you their loan A and loan B. Perhaps you don’t qualify for loan A and loan B has a high-interest rate. What then? It’s off to another lender to repeat the process. When you use a loan broker that specializes in construction loans, you can look at options from banks, private lenders, and the USDA all at once. You have a broader pool to choose from and an expert that can guide you in the right direction.
Competition
Feelings of frustration and humiliation are not uncommon among small business owners seeking financing. Forbes reports that, as of April 2022, big banks approved small business loans at a rate of just 14.5%. Smaller banks approved just over 20% of small business loans. That means that out of every ten small business owners seeking loans from those sources only two will be approved. This situation can leave applicants feeling like beggars.
Working with a broker flips that narrative and forces lenders to compete for your attention. That competition drives down interest rates and improves loan terms, getting you a much better deal than a direct lender experience. These lenders know you’ll see their product next to other banks and lenders. They’ll want to stand out as the top choice by giving you benefits the others don’t.
Security
When you submit a commercial loan application, you’re submitting sensitive information about your business and personal finances. This information likely includes your social security number, home address, bank account information, and balance sheet. That’s not documentation you want to send over an unsecured network.
A reputable broker will have secure channels and storage protocols to protect your information from hackers. They have a high stake in running a secure network to protect their client base. Unless you have spent the resources needed to build firewalls, SFTPs, and monitoring systems, you might be taking a risk every time you send an application out to a lender.
Support
Brokers offer a level of support you won’t find with most lenders. Many lenders are too big and too busy to give your business the individual attention it deserves. While they may be attentive once you have the loan in place, the high volume of applications they deal with can mean they don’t have time for your questions. Brokers on the other hand, can give you one-on-one support throughout the process.
Since brokers are usually paid by the lender, and typically not until you close the loan, it’s in their best interest to help you succeed. Making the closing process seamless is a priority. With a broker comes specialized knowledge that you can tap into. They can offer advice on more than just your loan application. Looking to improve your credit score for future borrowing? A broker can help you target problem areas in your financing that you can eliminate to boost your score faster. They can also show you how to better manage the debt you already have.
Before you go into a relationship with a commercial loan broker, there are some red flags to look out for. Most brokers get paid by lenders, so if you’re asked to pay a fee, think twice. You can use a simple internet search to check the broker’s reputation. A few useful sites are the Better Business Bureau, Trustpilot, and federal sites like HUD, FTC, and DOL. Some states require certain types of lenders to be licensed. If that’s the case in your state, check to ensure your broker’s license is in good standing.
A good broker is an invaluable asset when you’re in the market for a business loan. No matter where your business stands, brokers can provide inside knowledge, support, and resources. Talk with our team the next time you’re in the market for financing.